Mr. Marketos has agreed to respond to some of the questions raised in our previous issues as a result of our interviews with Paul Saunders, Chair of the American College of Trial Lawyers Task Force on Discovery and Civil Justice in the Final Report of the Joint Project of the College and the Institute for the Advancement of the American Legal System. It is expected that the Judicial Conference Rules Committee in reviewing the Federal Rules of Judicial Procedure at an upcoming May meeting will give serious consideration to the various views elicited. Mr. Marketos is a trial lawyer who practices commercial litigation in the firm's Dallas office.
Editor: Describe cases in which extensive e-discovery was threatened, but which were settled in order to avoid discovery costs .
Marketos: Very few. In my experience with commercial litigation, while e-discovery costs can be substantial, a case will rarely settle simply to avoid discovery costs when the amount in controversy exceeds it by several orders of magnitude. Even in smaller cases - like disputes with former employees - the cost of discovery driven by notice pleading is unlikely to force settlement because trial courts will grant relief from overly broad discovery requests.
Editor: Describe cases in which extensive discovery took place and whether or not the information developed affected the outcome.
Marketos: In a RICO and fraud case brought by a large, privately held company against several corporate officers, e-discovery and computer forensic evidence uncovered a covert and complex scheme to defraud that cost the company several million dollars. The discovery - which included e-mails and documents passed through personal e-mail accounts on the officers' work and personal computers - was critical to proving mail and wire fraud predicates and establishing fraud by "clear and convincing evidence."
In a case involving breach of non-compete, non-solicitation, and confidentiality agreements by two former employees, e-discovery and computer forensic evidence were the key to proving that the employees took customer lists and inventory information and were providing the same services to current customers of the plaintiff corporation. The case settled after the employees were confronted with the evidence during their depositions .
Editor: To what extent were cases commenced as an investigative tool to see whether or not facts could be developed that would justify bringing the case?
Marketos: In my opinion, it is not proper to file a lawsuit to uncover facts that justify the filing of the lawsuit to begin with. In Texas, a deposition before suit to investigate claims under TRCP 202 is the proper procedural vehicle for developing supporting facts. Otherwise, a lawsuit should be filed only if a good faith basis exists - on information and belief or otherwise - for alleging the causes of action asserted. In several cases we have been able to demonstrate that a plaintiff filed suit with neither information nor a good-faith belief to support the allegations in the petition. Plaintiffs run into serious trouble when their unsubstantiated allegations are supported by a sworn verification that attends an application for injunctive relief and the party is forced to acknowledge during depositions that they had no basis for swearing to the allegations.
Editor: The Supreme Court in Iqbal mentioned that unnecessary discovery could distract government officials from their work. To what extent does e-discovery have a similar effect on corporate employees? What other direct and indirect costs are triggered by e-discovery?
Marketos: Unnecessary discovery is as harmful to corporate employees as to government officials. While the courts are slightly less concerned about corporations absorbing costs, as opposed to the government, the abuse of the discovery process is obviously taxing on private litigants, and courts have begun to impose obstacles to unfettered e-discovery. The cost of discovery goes far beyond vendor costs and includes an extraordinary amount of internal overhead that is rarely quantified.
The cost of discovery should not be a basis for tactics of obstruction merely because a private corporation does not want to spend the time and money to gather e-discovery that is reasonably calculated to flesh out the merits of a claim. Nonetheless, all litigants - whether plaintiffs or defendants - should consider the scope of their discovery efforts and whether they are sufficiently tailored to be productive. Occasionally, a zealous client will want every document stored in an opponent's electronic database or e-mail server to put the opposing party to work. Not only will that approach drive up the opponent's costs, but it will increase both parties' attorneys' fees and likely be met with an equally burdensome request from the opponent. The best solution is for counsel to work together, comply with the rules of discovery and document production, and pursue the merits of the case by identifying, preserving, collecting, and producing relevant evidence as the facts in a case are developed.
Editor: How would fact-based pleading solve the problems addressed above? Describe any cases you have had where fact-based pleading was involved and the effect on e-discovery. Have there been any improvements as a result of Iqbal ?
Marketos: Fact-based pleading would address several concerns. First, it would ensure that a lawsuit is filed based on identifiable and specific allegations, and not merely to provide a vehicle for uncovering facts to substantiate suspicions. Second, fact-based pleadings provide a road-map for discovery for both parties and narrow the relevant evidence to the claims and defenses supported by the facts alleged. While trial courts - particularly state courts - have not demanded fact-based pleadings by rule (other than in fraud cases and those met with special exceptions in state court), judges are far less likely to grant broad discovery based on loose allegations in notice pleadings .
Editor: Let's turn to "proportionality."Describe cases where a proportionality requirement should have been applied to the amount of e-discovery and contrast them with any cases you have had in which the judge was guided by the principle of proportionality.
Marketos: Our clients have been fortunate to avoid disproportionate discovery costs - mostly due to the precedent set by cases (and new electronic discovery rules) requiring a requesting party to share in the cost of discovery. When we have been confronted by unreasonable discovery requests that seek virtually every electronic document housed in our client's offices, we have either prevailed on the opponent to narrow the request or provided the opponent with an estimated invoice for the work to be performed. Most often, the matter is resolved without court intervention when opposing counsel recognizes that the law favors proportionality and narrows the scope of the discovery requests.
Editor: Sanctions with respect to preservation of evidence and litigation holds have been of particular concern.Why do you feel that it would be useful to adopt the Principle that "sanctions should be imposed for failure to make electronic discovery only upon a showing of intent to destroy evidence or recklessness?"
Marketos: I don't particularly agree that this principle should be adopted as stated. The "reasonable anticipation of litigation" standard adopted by the Federal Rules of Civil Procedure and most state-court cases addressing sanctions is, in my opinion, fair and manageable. In our adversarial trial system, it is incumbent on counsel to communicate to their clients that, once litigation is anticipated, all steps should be taken to identify and preserve relevant evidence. That process does not end with an attorney's "litigation hold" letter, but should entail a detailed discussion with the client representative (and its IT personnel, if any) and the key players in the litigation to locate and preserve relevant documents and e-mails. A "head-in-the-sand" approach does not further the pursuit of justice for anyone.
That is not to say, however, that draconian sanctions are immediately available or appropriate for any misstep or oversight. I have found that trial judges are mostly accommodating of mistakes or the accidental destruction of data when a party demonstrates that it has respected the process, was made aware of the rules governing preservation, and endeavored to abide by them. Again, the lynchpin is the "reasonableness" standard that pervades the entire process.
Editor: How important do you feel providing hard data on litigation costs to be?
Marketos: I feel it is imperative to provide clients and opposing parties with realistic, hard data on the costs of discovery. The problem, of course, is that the facts (and scope) of each case are unique - as are the proprietary document management systems of each client. Without significant experience in e-discovery, including with e-discovery vendors, their processes, and their software programs, counsel is often guessing in the dark. "Hard data" is usually soft data because counsel underestimates not only the cost of identifying and collecting e-discovery, but of reviewing the data for relevance and producing it. The attorneys' fees associated with document review - including unnecessary and duplicative efforts to review for privilege and substance - is often two or three times the estimate provided to the client.